Recently, the REIT IPO that did not quite take off was GLP’s logistics REIT with Chinese assets. The book was two-thirds covered by cornerstones and anchors ahead of a potential IPO. That may not have ensured a good post-IPO performance, some market watchers have said, while others pointed out that the demand is an indication of strength. Whatever the case, the IPO is likely to be postponed for some weeks because of market volatility.
On the other hand, Lendlease Global Commercial REIT’s (LREIT) placement was 3.3 times subscribed, with strong demand from long-only institutional investors and real estate specialist funds, which accounted for more than 80% of the total proceeds.
On Feb 14, LREIT’s manager announced the proposed acquisition of the remaining stake in Jem it did not own, based on an agreed value of $2.079 billion. At that time, LREIT’s manager had indicated that the accretion to distribution per unit (DPU) would be as high as 10% depending on the equity fund raising (EFR) plan.
The DPU accretion would be “based on the gross proceeds raised from the EFR of $837 million with the new units issued at an illustrative issue price of $0.82 per new unit”, LREIT’s manager stated in a presentation. DPU accretion increases by approximately 0.6% for a 1 cent increase in the illustrative issue price, and vice versa.
As it happened, LREIT’s manager announced a placement and a preferential EFR on March 22. The placement, which was 3.3 times subscribed, was upsized to $400 million, and LREIT units were priced at $0.725. A separate preferential equity offering to existing unitholders priced at $0.72 is likely to raise a further $248.8 million. Since a 1-cent decrease in the illustrative issue price decreases DPU accretion by 0.6%, a 10-cent decrease in the issue price is likely to shave 6% off the accretion. Hence, the DPU accretion is likely to be nearer 4% than 10%.
“The EFR amount is lower than the initial plan of $718 million due to the weak share price recently. Hence, we think LREIT may look to raise more debt/perps (perpetual securities) to make up the funding shortfall,” says CGS-CIMB in an update. CGS-CIMB had originally estimated DPU accretion at between 0.1% and 3.6% but expects the accretion to be above 3.6%.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
MNACT unitholders get all-cash offer from MCT’s manager
On March 21, the managers of Mapletree Commercial Trust (MCT) and Mapletree North Asia Commercial Trust (MNACT) announced a third, all-cash option for unitholders of MNACT. On Dec 31 last year, the MCT and MNACT managers announced a merger, with MCT acquiring MNACT. MNACT unitholders could opt for either all units or cash and units.
The all-unit offer comprises 0.5963 MCT units for one MNACT unit. In the cash-plus-unit offer, MNACT unitholders would receive 0.5009 MCT units and $0.1912 in cash per MNACT unit. The MCT units would be issued at $2.0039 per unit, pricing MNACT at $1.1949 per unit. In the third, all-cash option, MNACT unitholders can opt for cash of $1.1949 for each MNACT unit, pricing MNACT at its net asset value (NAV) as at Oct 31, 2021.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
“The introduction of the alternative cash-only option gives higher cerprevailing market conditions and provides greater flexibility for MNACT unitholders to elect the form of the scheme consideration that is most suited to their investment needs,” the managers said. Sponsor Mapletree Investments has given an undertaking to take the all-unit option for its MNACT units. The cash-only option will be funded by a preferential equity offering priced at $2.0039 to raise $2.2 billion. Mapletree Investments will backstop the entire equity fund raising.
“The inclusion of the cash-only consideration achieves the same pro forma financial effects as the existing cash-and-scrip consideration option. In particular, there will be no increase in the maximum number of new MCT units to be issued,” MCT’s manager says.
The merger remains DPU and NAV accretive to MCT unitholders on a pro forma basis, MCT’s manager says. Since the pro forma financial impact remains the same as the original cash-and-unit offer, there is no incremental debt financing requirement, nor will the all-cash option impact on the aggregate leverage of MCT and the merged entity, to be named Mapletree Pan Asia Commercial Trust (MPACT).
The all-cash offer for MNACT had an immediate positive impact on its unit price. However, MCT’s unit price continued to languish. Market watchers and analysts expect MPACT’s yields to be nearer 5% than MCT’s more compressed 4.5%– 4.7% as REITs with North Asian assets generally trade at higher yields and at discounts to NAV. The timeline for the merger has been extended.
The EGMs are likely to be held by end-May. For MNACT, unitholders have two resolutions to vote on — proposed amendments to MNACT’s Trust Deed to introduce provisions to facilitate the implementation of a trust scheme of arrangement; and the trust scheme. Mapletree will abstain from voting on MNACT’s resolution 2 which is the trust scheme.
MCT unitholders have four resolutions to vote on. First is the merger by way of a trust scheme or arrangement. Resolution 2 is the issuance of new MCT units for the merger, and resolution 3 is a whitewash waiver. Resolution 4 is an extraordinary resolution to change the fee structure so that it is more aligned with MPACT’s unitholders. Resolutions 1, 2 and 3 are interdependent. Mapletree and its associates will abstain from voting on MCT’s resolutions 1, 2 and 4. If all the resolutions are voted through, and court approvals are obtained, the merger should complete by end-August.
Judging by the large volume traded in MNACT units and its almost 20% upside rally, impatient traders and hedge funds which are generally short-term in nature — unless they get stuck with a large stake in a small REIT — could have exited.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
ALOG and ESR-REIT merger gets green light
Unitholders of ARA LOGOS Logistics Trust (ALOG) and ESR-REIT have voted in favour of their respective mergers. This means that the duo will become ESR LOGOS REIT or E-LOG. The completion date is likely to be sometime in May, with both REITs announcing a long-stop date of May 15.
At ESR-REIT’s EGM on March 21, 98.6% of the total number of votes received from ESR-REIT unitholders were cast in favour of the ordinary resolution relating to the merger and approximately 98.4% of the total number of votes received from ESR-REIT unitholders were cast in favour of the ordinary resolution relating to the proposed issue of new ESR-REIT units to ALOG unitholders at an issue price of $0.4924 for each ESR-REIT unit.
At ALOG’s EGM, 98.4% voted in favour to amend the trust deed, and 62.9% in number of ALOG unitholders, representing about 92.5% in value of the ALOG units, voted in favour of the trust scheme.
Karen Lee, CEO of ALOG’s manager and deputy CEO of E-LOG’s manager, says that E-LOG is likely to implement its strategy. In an earlier briefing, Lee says: “We have a $2 billion pipeline that is immediately available and visible, and we will be executing this $2 billion pipeline within the next 12 to 24 months.”
A spokeswoman for ESR-REIT’s manager says the REIT had held off some projects from last year following the announcement of the merger, and will be looking to complete those projects. These include AEIs. As for Sabana REIT, that is not the focus.
